Advisers have called on the FCA to force firms to issue cigarette-style investment warnings on unregulated investment funds.
Alan Steel, chairman of Linlithgow-based Alan Steel Investment Management, and Martin Dodd, director of West Midlands-based Midlands Investment Agency, said they were constantly bombarded by unsolicited calls and emails about unregulated investment funds.
In the interests of protecting the unwary investor, Mr Steel said he would like to see big warnings on investment literature. He said: “All unregulated funds should have big, clear warnings, just like cigarette packs. It’s not difficult.
“There should be big warnings: ‘Damage to Wealth or Health’. The warnings should make it obvious.”
Mr Dodd called these funds “dangerous”, saying: “With no ‘policeman’ to keep them in check, it could be described as the Wild West”, and warned investors to seek professional advice before deciding to invest.
He said: “Very simply, the fact these are unregulated means that if something goes wrong, you will have very little protection if any, and have little recourse to recover your investment.
“If that’s not enough to discourage investors, many of them are being promoted by companies and so called “advisers” based abroad, so again, if it goes wrong there are few options open to you.”
He also questioned why so many unregulated collective investment scheme funds were designated as ‘for sophisticated’ investors, adding: “In my opinion a ‘sophisticated’ investor would not want to invest in this type of investment. So why are people attracted to them?
“They often offer guaranteed returns that cannot be obtained here in the UK. Usually when an investment is guaranteed and is substantially better than what can be achieved in a regulated investment, it’s unlikely to work out.”
Regulatory view
Ruth Wharram, press officer at the FCA, said: “We have always said that we are not a product pre-approval body. However, we recognise that firms are cautious, so we welcome firms coming and discussing with us any products they intend to launch about which they have concerns.
“In addition, we have set up Project Innovate to help give a steer to those firms looking to bring new ideas to market, and support them through authorisation.”
